Correlation Between Model N and Karooooo

Can any of the company-specific risk be diversified away by investing in both Model N and Karooooo at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Model N and Karooooo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Model N and Karooooo, you can compare the effects of market volatilities on Model N and Karooooo and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Model N with a short position of Karooooo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Model N and Karooooo.

Diversification Opportunities for Model N and Karooooo

0.21

Correlation Coefficient

Model N  Karooooo

Modest diversification

The 3 months correlation between Model and Karooooo is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Model N and Karooooo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karooooo and Model N is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Model N are associated (or correlated) with Karooooo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karooooo has no effect on the direction of Model N i.e., Model N and Karooooo go up and down completely randomly.

Pair Corralation between Model N and Karooooo

If you would invest  4,040  in Karooooo on September 19, 2024 and sell it today you would earn a total of  496.00  from holding Karooooo or generate 12.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.59%
Values	Daily Returns

Model N  vs.  Karooooo

Model N

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Model N has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Model N is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Karooooo

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Karooooo are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Karooooo displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Model N and Karooooo

The main advantage of trading using opposite Model N and Karooooo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Model N position performs unexpectedly, Karooooo can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Karooooo will offset losses from the drop in Karooooo's long position.

The idea behind Model N and Karooooo pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.